If you're looking to elevate your coding skills in Ruby on Rails, understanding the power of gems is crucial. Gems are libraries or plugins designed to add specific functionality to your application without the need to reinvent the wheel. Among the myriad of options available, here are the top 10 Ruby on Rails gems that can make a significant impact on your development experience:

1. Devise: A flexible authentication solution for Rails applications.
2. CanCanCan: An authorization solution for Ruby on Rails, providing a simple way to manage user permissions.
3. ActiveAdmin: A framework for creating beautiful administration dashboards.
4. Paperclip: A gem for easy file attachment to ActiveRecord models.
5. RSpec: A testing tool for Ruby that is designed for behavior-driven development.
6. Sidekiq: A background processing library that helps manage long-running tasks easily.
7. FactoryBot: A library for setting up Ruby objects as test data.
8. Pundit: A simple and extensible authorization solution that helps manage access in an application.
9. SimpleCov: A code coverage analysis tool that helps ensure your tests cover the necessary parts of your code.
10. Foreman: A tool to help manage Procfile-based applications, making it easier to run multiple processes.

Building a simple web application from scratch using Ruby on Rails is an empowering experience that allows developers to grasp the fundamentals of web development. To start, you'll need to set up your development environment. Ensure you have Ruby installed on your system along with the Rails gem. You can do this by running gem install rails in your terminal. Once your environment is ready, you can create a new Rails application by executing rails new myapp, where 'myapp' is the name of your application. This command will generate a directory structure filled with essential files needed for your web app.

After your application is generated, it’s time to create your first resource. Use the Rails generator to create a scaffold for a simple resource, like a Post. Run rails generate scaffold Post title:string body:text, then migrate the database with rails db:migrate. This will create a basic CRUD interface for managing posts. Finally, start your server with rails server and navigate to http://localhost:3000/posts in your browser to see your web application in action. This simple process illustrates the power of Ruby on Rails in rapidly developing web applications without having to write extensive amounts of code.

Ruby on Rails developers often encounter various coding challenges, particularly when it comes to optimizing performance and handling database migrations. These issues can stem from poorly written code or inefficient queries that slow down the application. A common challenge is the N+1 query problem, which occurs when an application makes multiple queries to fetch associated data. To overcome this, developers can utilize the includes method to eager load associations, reducing the number of queries and improving application performance. Regularly profiling the application using tools like Bullet can also help identify and eliminate these performance bottlenecks.

Another frequent hurdle is dealing with testing in Ruby on Rails. While Rails provides a great framework for creating tests, developers may find it challenging to write effective unit and integration tests for complex systems. One way to tackle this issue is by adopting the RSpec framework, which offers a more expressive syntax and powerful tools for writing tests. Furthermore, developers should focus on test-driven development (TDD) principles, which emphasize writing tests before coding to ensure that new features do not break existing functionality. By fostering a strong testing culture, teams can significantly reduce bugs and enhance the reliability of their applications.